Mortgages with One Years’ Accounts

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Self-Employed people often hear that it’s harder to get a mortgage, and that you need at least two years’ accounts to be considered. But some mortgage lenders will accept people with just one year’s accounts – and it’s not as hard as you might think to find Self-Employed mortgages. 

Can you get a mortgage if you’ve only been Self-Employed for one year?

When you approach a lender for a mortgage, they want reassurance that you can afford to pay back their loan. It’s very straightforward if you have a standard job; you just give details of how much you earn. When you’re Self-Employed your income is often more variable, so the lender will take a little more convincing that you’ll be a reliable customer. They will want to see evidence of your annual earnings, and many will require at least two years’ worth of accounts. A few specialist lenders will accept just one years’ accounts, and some will even take 9-10 months’ business records – as long as the company is performing well.

How do I prove my income with only one years’ accounts?

Proving your income means sharing a few documents, including a set of accounts, certified by a qualified accountant. These should include full financial details for the latest year including profit, loss, salary and dividends. You might also need to supply your self-assessment tax return (SA302) stating your annual earnings. Lenders will also check your credit score. If you’ve had credit problems in the past six years you might need to search a bit harder for a lender, and you might be offered higher mortgage rates.

What happens if I’m a Sole Trader, in a partnership or have a Limited Company?

There is no legal separation between you as a sole trader and your business, so your business profits and your income are one and the same. Lenders will often request the SA302 self assessment form to verify your income. If you’re in a partnership, you will be assessed on your share of the profit – which might mean you can borrow less than you were hoping. For a limited company, the mortgage company is likely to look at your finalised accounts. They often base your loan amount on the stated salary and dividends. Meanwhile some lenders will also include your net profit – which usually means you can borrow more.

How much can I borrow?

The amount you can borrow is calculated the same way as for an employed person – around four to five times your income. Use a mortgage calculator to see what this might be based on your stated annual income. Make sure that the monthly repayments are comfortably affordable, as your home is at risk if you can’t keep up with the payments. Self-Employed borrowers often choose to protect their mortgage with an insurance policy. Self-Employment is more risky than a traditional employed job – especially because there is no sick pay. Income protection pays the mortgage if you can’t work due to illness or injury.

What deposit will I need?

While the minimum deposit is 5% of the property value, if you can put down 15% or more you’ll get better rates and a wider choice of lenders. Some 5% mortgage deals are available, but remember that this will make your monthly payments considerably higher.

Can I get Help to Buy as Self-Employed with one years’ accounts?

The UK government Help to Buy schemes aim to make it easier for people to get on the property ladder. The Equity Loan scheme enables you to buy with just a 5% deposit, with an interest-free loan from the government to put down a deposit of up to 25% (45% in London). Another option is Shared Ownership, where you part-rent, part-buy a property. Both schemes are available on new build homes. Help to Buy is open to the Self-Employed including people that have only been trading for a year. The challenge will be to find suitable lenders – which is where Choice can help you.

How can a Mortgage Broker help?

Here at Choice we are professional mortgage brokers, which means we will compare hundreds of mortgage deals on your behalf, across high street lenders and more specialist companies. Our mortgage advice has helped many Self-Employed people achieve their property goals. We even take charge of mortgage applications to make the process stress-free for you. We are authorised and regulated by the Financial Conduct Authority, so give us a call today and see how we can help you find a good mortgage deal.

Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.